Book Review — Free Lunch, How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)
Free Lunch, How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) by David Cay Johnston documents many of the ways that politicians and business owners collude to transfer massive amounts of tax revenues into the pockets of these business owners. Johnston is a reporter at the NYT and his beat is tax policy. Much of what he writes about here is derived from this NYT reporting. I often think of him as being one of the last best reasons to read that paper.
Johnston begins by talking about the fundamental shift in a major part of US economic policy — since the end of WWII policy was oriented to grow and support a middle class. In 1980, Ronald Reagan became President with the promise of re-orienting economic policy to the support of “free markets” with , of course, the benefits trickling down to everyone else. As Johnston documents in case after case, the “free market” is one of the first things that politicians and these business owners seek to restrain via extraordinary subsides (consisting of taxpayer dollars) to these business owners. As a result, taxpayers now shoulder much of the business risk incurred by business owners without getting much of the benefit. And the effort to socialize business risk while privatizing business profits is a wholly bi-partisan affair – both Democrats and Republicans have been all too eager to transfer your tax dollars to their business interests.
One of the (now) famous stories here is how Cabela’s got the town of Hamburg, PA to pony up for its new store: “The tribute Cabela’s demanded from Hamburg [Pennsylvania] amounted to roughly $8,000 for each man, woman, and child in town.” In return, the town fathers helped put a local hunting goods store out of business (one who used a Cabela’s catalog on his counter to show how his customers were getting a better deal); and never got anywhere near an even return on its investment. Johnson notes that between 2004 and 2006, Cabela’s profits were $223.4 million, but collected about $293.7 million in subsidies, more than its reported profits. And while Cabela’s balance sheets look great, the local governments handing over the cash that accomplishes this are starving their libraries, their schools, their first responders.
Each chapter in the book goes into detail on a single scheme: the sham of Title Insurance; ENRON and their manipulation of the electric markets; the use of eminent domain to transfer land and its value to wealthy businesses (here he provides a great breakdown showing that the entire value of the Rangers by the time Bush sold them is due to the tax breaks and subsidies received); sports stadiums (George Steinbrenner has gotten $655M and counting for the new Yankees venue) and many others.
He even goes into the story of Magnequench – and how the Chinese got neodymium magnet (crucial magnet technology used in guided missiles) research and manufacture moved completely out of the United States. This is a company that Hillary Clinton famously has run an ad denouncing the closure of the plant. Johnston notes that this plant was able to move to China with the help of the Bill Clinton administration – as David Sirota documents recently.
Johnston’s tone here is certainly not one he could get away with in the pages of the NYT – you can tell that he is more than a little outraged and the writing here takes a moral tone. This seems appropriate, though, when the subject is how the government rewrites the principles of Adam Smith to suit the lobbyists of the wealthiest businesses and individuals in the US.
Free Lunch is another great read for this campaign season – the better to decode the campaign promises with. You won’t hear another politician extolling the free market on behalf of some interest group in the same way ever again. And you’ll likely recognize a tactic or two being implemented right here in the McDowell/SEU scam.
Tags: Corporate America, Politicians, Pork
This is an excellent post Cassnadra and lays bear the reality that the free market is really a free lunch for some and a hard market for the many.
Thank you for the kind words about Free Lunch, which I wrote in the hope that people would see how estranged our national economic debate is from the reality buried in the public record. I have been speaking all across the country on the issues examined in Free Lunch.
Two details:
I left The NYT in April, taking a buyout so I can focus on books and documentaries. Also, there is there is a “t” in my last name.
Thanks for stopping by, David. Now I guess there are no good reasons to read the NY Times… 🙂
I’m really honored you came by to read this, David, and very embarrassed I misspelled your name. I think I’ve gotten the later problem fixed. Do you have any appearances planned for the Philadelphia or Wilmington area soon?
And I think that the only reason left to read the NYT now is Frank Rich.
Oh, Cassandra M, there are lots of reasons to read The NYT, not the least that, flaws and all, it is as good as it gets. How about Barstow’s expose of the supposedly independent military analysts appearing on TV? And the continuing solid coverage of Gitmo detainees? Or this morning’s Nina Bernstein piece on dozens of minimally-explained deaths among people in the custody of federal immigration officials?
I do not have any appearances yet in Philly/Wilmington, but would be glad to come if several groups want to bring me down from Rochester. I try to do 3-4 talks in a day to make good use of time — a religious group, a college, a civic group, etc. There is a link to reach me at the home page for Free Lunch.
And thanks for fixing the spelling.
David, you are right that the NYT does do good journalism, it is just that to this information junkie, it seems the exception rather than the rule these days. But I will cop to judging the rest of the paper by the Times’ often unenlightening political coverage.
But if you are still reading this, I’d love to know your thoughts on why news organizations don’t seem to do much of the kind of investigative policy and policy effects reporting that is on display in this book (and in the previous one — Perfectly Legal. This kind of reporting and information just seems crucial to being able to effectively engage elected officials who seem largely tilted to just rubber stamping these kind of taxpayer fund transfers, but it is awfully hard to get this detail, especially from local press.
There is tremendously more investigative reporting being done today than when I started out in the 1960s. You can find a lot of it from all around at ire.org, the website of Investigative Reporters and Editors.
The Wilmington, Del., paper is owned by a chain best known for generating huge profits by skimping on news. Still, your local (if you live in the Wilmington area) paper has done some superb work on electricity prices, to cite the one example I know well.
Serious enterprise and investigatuive work is VERY expensive, while covering what they cops say (often in a one-sided way), local trials and what local business leaders want covered is cheap and easy. And as readers turn away then revenue drops and there is even less money for serious watchdogging, a vicous cycle in which publishers and readers both play a role.
Thanks for this response — I’ll need to nose around that IRE site abit more. If you join it looks like a really great resource.
And as readers turn away then revenue drops and there is even less money for serious watchdogging, a vicous cycle in which publishers and readers both play a role.
This is true, but also opens the door for books like yours, where it is possible to get this information in an extended form. It’s just not possible to read them all, and a focused treatment of the latest goings on of the local government here is not likely to be produced.
Are you working on a new book now?
And I’ve passed your info on to the Philadelphia Free Library Lecture Series folks. This is an exceptional lecture series and I do hope they can include you in the next season. Yours is a very important work.